Changes to Visa’s Business-to-Business (B2B) Program Has Increased Costs for Distributors and Manufacturers starting with August Statements
The pandemic has impacted how we do business, sometimes in ways that we are still trying to figure out. The largest impact has been the uncertainty it has created. How do you plan for what’s next if you don’t understand what’s happening right now? At a time when certainty is at a premium, when predicting costs is most important, a major update to interchange has taken effect that will impact your bottom line.
Planned Changes That Could Have Waited
To be fair, interchange rate updates are a normal part of our industry and typically occur every April and October. Changes are pre-announced, published and prepared for. Whatever your opinion on the changes implemented, updates are done in a planned and orderly manner.
Due to the impact of COVID-19, Visa’s April updates were postponed. Changes that will affect consumer cards have been pushed off to 2021. Since Visa owns 60% of the market, this will help plenty of businesses who sell direct to the consumer. However, changes to business credit cards that impact B2B companies took effect mid-July. These changes could have waited until 2021, or at least until the full impact of the downturn and potential recovery is known.
Understanding How This Affects You
The “Who” – The merchants affected are those who primary sell to other businesses where the processor classified the merchant with the appropriate MCC code.
The “What” – Visa has eliminated their B2B qualification for all their Business card products. These cards are listed on your statement as “Business Tier 1” up to “Business Tier 4”. Since most B2B companies key-enter cards, these qualifications will now appear as Card-Not-Present. In addition, a new “Business Tier 5” has been added. Currently, these costs are the same as Tier 4, but expect that to change soon.
The “When” – Though the update took effect mid-month, August will be the first full month of processing where merchants will feel the full impact of the changes.
“How Much” – Affected merchants will see interchange rates increase by 20bps for these cards (15bps for Tier 1 only). This translates into an increase in actual costs of $200 for every $100,000 processed for Business Tier cards.
“How Much More” – The added threat is an increase in your MSPs fees. Processors use interchange updates as an opportunity to fold in new administration fees or raise their Discount Rate.
How to Fight Against What’s Next
Start by submitting your statements to IQCS for a FREE Assessment of your processing costs. Consider signing up for our IQ Care program to rein in costs and keep them under control for good.